The present study compared the influence of bi-literate bilingualism versus mono-literate bilingualism on the development of literary skills in English as L3. Two main predictions were made. First, it was predicted that Russian (L1) literacy would benefit decoding and spelling acquisition in English (L3), that is, bi-literate bilingualism would be superior to mono-literate bilingualism. Second, it was hypothesized that there would be positive transfer of phonological processing skills from L1 Russian to L3 English even in the context of two linguistically and orthographically distinct languages. The sample of 107 11-year-old children from Haifa, Israel, were divided into three groups matched in age, gender, social-economic level, verbal and non-verbal IQ: bi-literate bilinguals, mono-literate bilinguals and mono-literate monolinguals. The research was conducted in two stages. In the first stage a wide range of linguistic, meta-linguistic, cognitive and literacy tasks in Hebrew (L2) and in Russian (L1) were administered. In the second stage linguistic, meta-linguistic and literacy skills in English (L3) were assessed. The results demonstrated that bi-literate bilinguals outperformed mono-literate bilingual and mono-lingual children on a number of basic literacy measures (phoneme deletion and analysis, pseudoword decoding and spelling) in English (L3). Even after controlling for (L2) Hebrew reading accuracy, bi-literacy independently explained 16% of the variance in English reading accuracy among Russian-Hebrew fifth grade bilinguals.